With lefty nostalgists like Paul Krugman pining away for a return to the punitive income tax rates of up to 90 percent in the 1950s, it is worth taking in what just happened in France. France’s unreconstructed socialist president Francois Hollande made a big splash upon taking office of instituting a 75 percent income tax on all incomes over 1 million Euros.
So how’d that work out?
From Yahoo news today:
Paris (AFP) – Once a flagship policy of French President Francois Hollande, the 75-percent “supertax” on top earners limps into its final weeks this month having sparked plenty of controversy but few economic results.
It was no surprise that the policy, which expires on February 1, would be quietly dropped: it was only ever slated to last two years and the Socialist government has for months declared it would not be renewed.
The tax had also been watered down until it was barely a shadow of the “exceptional contribution to solidarity” proclaimed by Hollande when he came to power in 2012.
In other words, the French income surtax operated just like our high rates of the 1950s did—in such a way that nobody named “Kennedy” ever paid them. Anyway. . .
The fate of the supertax mirrored the wider trajectory of the troubled Socialist presidency, which was elected in a surge of left-wing enthusiasm but has been forced to temper its initial approach in a desperate bid to escape the country’s economic quagmire.
Even by its own standards, the tax was largely a failure — the watered-down version brought in minimal revenue and did little to tackle wealth inequalities.
It also had a limited impact on the government’s efforts to balance its books and pay off ballooning debts.
Still more damaging was the way it added to the perception of France as “anti-business”, an image that was gleefully exploited across the Channel in Britain where Prime Minister David Cameron said he would “roll out the red carpet” for French executives fleeing the supertax.
Facing record unemployment, a sluggish economy and unable to meet European borrowing limits, Hollande has since taken his country in a very different direction.
Last year he appointed economic liberals such as Prime Minister Manuel Valls and Economic Minister Emmanuel Macron to give the impression of a France “open for business”.
For his Socialist party, such efforts lie somewhere between blasphemy and high treason. Hollande was forced to dissolve the government in August and fire two leftist ministers who opposed the new direction.
But he appears willing to risk a civil war in his ranks to reverse the long cycle of economic disappointment that has helped his popularity ratings plumb unprecedented lows.
Businesses blame red tape and high taxes for throttling economic activity, leading to a rare protest by business owners last month.
“Businesses are in danger of dying,” said Gerard Ramond, representing small and medium-sized enterprises at one demonstration. “This year, 70,000 businesses went bankrupt. That’s 110,000 jobs gone.”
Hollande appears to be listening, and is pinning his hopes on a package of reforms to boost business activity — cutting public spending and red tape, opening up “protected” professions and relaxing rules on Sunday trading.
I’m sure Obama and his crew will get the message right away.